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Empirica

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Is Austria’s economy locked-in in the CESEE region? Austria’s competitiveness at the micro-level

  • Mahdi GhodsiEmail author
Original Paper

Abstract

This paper analyses the competitiveness of Austrian manufacturing industries by comparing the performance of Austrian firms with the Western European firms using recent estimates of total factor productivity (TFP) across Wider Europe (EU-28 plus Western Balkans) during the period 2007–2015. According to the TFP estimates, Austrian firms with larger turnovers, and less employment, in regions with less regional-industrial concentration of labour have become more competitive in terms of TFP. Using firm’s TFP and other characteristics aggregated by industries across Wider Europe, a structural gravity model for exports is estimated. In line with the Ricardian models of trade and new trade theories, results show that larger trade across countries in the sample is driven by intra-firm trade, and comparative advantages that are measured as better efficiency of industries in terms of simple average of TFP growth of firms and more allocation of capital to more efficient firms. Comparing the actual values of exports from Austria to Central, East and Southeast Europe (CESEE) with the counterfactual predicted values of the structural gravity model, I find that since 2012 excessive exports were directed to Western Europe rather than to CESEE. In a robustness check using unilateral exports value, these interesting findings also confirmed that a potential Austrian lock-in effect in the CESEE region reversed and trade diverged to the more competitive market of Western Europe.

Keywords

Firm performance Total factor productivity (TFP) Structural gravity model Exports performance Lock-in effect 

JEL Classification

D22 D24 F14 F15 F23 L25 

Notes

Acknowledgements

Research for this paper was financed by the Anniversary Fund of Oesterreichische Nationalbank (Project No. 17037). Financial support provided by Oesterreichische Nationalbank for this research is gratefully acknowledged.

Special thanks should go to Vasily Astrov, Loredan Fattorini, Mario Holzner, Michael Landesmann, Sandor Richter, Armando Rungi, Robert Stehrer, and Roman Stöllinger for their suggestions and constructive comments during the preparation of this work.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Vienna Institute for International Economic Studies (Wiiw)ViennaAustria

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